LNG export revenue to bring signifi cant improvement in ...

ELECTRIC VEHICLE AMBITIONS: Page 2

Xiaomi Corp to buy self-driving technology startup Deepmotion

Friday, August 27, 2021 Muharram 19, 1443 AH

GULF

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BUSINESS

MONETARY POLICY: Page 4

Fed officials call for early taper despite Delta variant risk

Qatar banks display lowest NPLs, highest ROE in second quarter: Kamco Invest

By Santhosh V Perumal Business Reporter

Qatari banks had the lowest bad loans on their books as well as the highest provision cover and return on equity (ROE) among the Gulf Co-operation Council (GCC) lenders during the second quarter (Q2) of 2021, according to Kamco Invest, a Kuwait-based non-banking financial powerhouse.

The Qatari banks' Stage 3 impaired loans stood at 2.5% (of the gross loans) at the end of Q2-2021, a slight jump from 2.4% in the first quarter (Q1)2021; even as the average share of bad loans (Stage 3 loans) on the GCC banks' loan books remained stable quarter-onquarter at 4.2%.

The non-performing loans (NPLs) for the UAE banks continued to remain the highest in the GCC at 6.1% at the end of Q2-2021, in line with Q12021 share. In the case of Bahrain banks, it was 4.7%, Oman (4.1%) and Kuwait (2.7%).

The report found that the aggregate provision cover (excluding Saudi Arabian banks) that GCC banks made against Stage 3 bad loans stood at 66.4% at the end of Q2-2021. The provision cover has increased "consistently" since last year when it stood at 64.7% (excluding Saudi Arabian banks) and in Q1-2021 at 65.4%.

Qatari banks were found to have the highest cover against Stage 3 bad loans in the GCC during the quarter at 91.4%, slightly lower than the Q1-2021 cover of 91.9%. Bahraini banks were next at 69.1%, followed by Omani and Kuwaiti banks at 61.8% and 60.3% respectively. The UAE banks reported the lowest Stage 3 provision cover of 58.8%.

Highlighting that data on credit facility by sector for the GCC countries showed mixed trends, with Q2-2021 being broadly positive across the region, the Kamco Invest report said the trends in Saudi Arabia

and Qatar continued to remain "strong".

According to the Qatar Central Bank, the aggregate quarter-on-quarter lending growth stood at 2.5% in Q2-2021, a decline from 4.1% growth seen during Q1-2021.

However, lending to all the domestic sectors reported growth during the quarter with total domestic lending up 4.1% that was partially offset by a decline of 17.7% in credit outside Qatar.

The aggregate ROE for the GCC banking sector continued to show improvement during Q2-2021, reaching a four-quarter high level of 9.1% compared to 8.1% at the end of Q1-2021. However, the ratio remained relatively low against the prepandemic levels of over 10%.

In terms of year-on-year performance, the ratio declined by 90 bps or basis points, mainly due to the decline in aggregate 12-month profitability. Total shareholder equity reached $339.6bn, after increasing by 8.9% from the previous quarter.

At the country level, Kamco Invest said Qatari banks continued to have the highest average ROE of 12% at the end of Q2-2021 compared to 11.6% at the end of Q1-2021. Saudi Arabian banks were next with an average ROE of 11%, the UAE (7.3%), Oman (6.4%) and Kuwait (6.1%).

The aggregate loan-to-deposit ratio for the GCC banking sector remained above the 80% mark at the end of Q2-2021 to reach 80.4%, after increasing by 20 bps against Q1-2021, the report said.

At the country level, Kuwaiti banks reported the biggest increase in loan-to-deposit ratio that reached 75.2% after seeing a quarter-on-quarter growth of 110 bps. Qatari banks reported an increase of 100 bps to regain a loan-to-deposit ratio of 90%. The Omani banks, on the other hand, reported the biggest decline of 220 bps but still had the highest loan-to-deposit ratio in the GCC at 91.5% at the end of Q2-2021.

Saudi Arabia launches SAR4bn plus initiative to develop information technology sector

Saudi Arabia announced a package of initiatives with a total value of more than SAR4bn, in co-operation with 10 of the most important technology giants in the world, on the sidelines of the `Launch' event, which was held in Riyadh on Wednesday. The organisers of the event revealed three main initiatives, one of which focuses on achieving the Kingdom's goal in the technology industry,

through the launch of the National Programme for the Development of the Information Technology Sector, with a budget estimated at SAR2.5bn. During the same event, the Saudi-Chinese eWTP Arabia Capital Fund was announced, which seeks to support emerging technology companies in the Kingdom with an estimated capital of about 1.5bn riyals.

LNG export revenue to bring significant improvement in Qatar's budget: BNP Paribas

In its second quarter report, BNP Paribas Economics Research noted the country's budget may return to surplus this year and in 2022 given the expected increase in oil prices and control over spending

By Pratap John Business Editor

Asharp increase in revenue from LNG exports will bring significant improvement in Qatar's budget; BNP Paribas said and noted the country's budget may return to surplus this year and in 2022 given the expected increase in oil prices and control over spending.

In its second quarter report, BNP Paribas Economics Research said the fall in oil prices resulted in a drop in fiscal revenue in 2020.

Some 85% of total revenue comes from the oil and gas sector. However, BNP Paribas estimates that the budget deficit remained modest, at 1.7% of GDP, thanks notably to a reduction in investment spending.

Direct fiscal support to the economy was limited and the government avoided any in-

A part of the Ras Laffan Industrial City (file). As with the public accounts, the introduction of new LNG export capacity should help generate significant current account surpluses over the medium term.

crease in current spending. Between 2016 and 2019, public sector investment was very high, accounting for more than 40% of total spending, but this cycle now seems to have come to an end with the completion of the bulk of the infrastructure related to the 2022 World Cup

(FIFA World Cup Qatar 2022). The external accounts are

dominated by hydrocarbon exports (more than 85% of total exports, including 64% from LNG).

The trade balance has a large structural surplus, equivalent to 25% of GDP on average between

2015 and 2019, BNP Paribas said. In 2020, the current account ran a deficit equivalent to 2.5% of GDP. The rebound in oil prices should help the current account move back into surplus in the short term.

As with the public accounts, the introduction of new LNG

export capacity should help generate significant current account surpluses over the medium term.

Total external debt is high (139% of GDP in 2020) and has been climbing steadily. This level of debt is not, in and of itself, a threat to the country's solvency. Government assets are greater than 200% of GDP, BNP Paribas said.

Part of this debt (around 15% of the total) has been contracted by the government and by private non-financial companies. The rest consists of Qatari bank debts to foreign counterparts.

The annual growth in claims on the private sector (around 60% of total domestic credit) has averaged 13% since 2015 (7.4% for the public sector), whilst deposits grew by an average of only 2.3% over the same period. Total bank assets represent around 240% of GDP, BNP Paribas said.

Against this background, banks have called on external resources (37% of total bank resources in 2020) in the form of non-resident deposits (37% of total external liabilities) and interbank loans (48%), with the remainder consisting of debt issued on international markets, BNP Paribas noted.

Curia Business Group launches Innovation Programme for `aspiring entrepreneurs'

Hussain Akbar al-Baker.

Curia Business Group, a Qatari venture and management consultancy founded by Hussain Akbar al-Baker, has announced the launch of its incubator programme ? Curia Business Innovation.

The Curia Business Innovation Programme has been designed to provide "aspiring entrepreneurs with a personalised step-by-step guide" to take their business idea from concept vision to reality. Curia has years of experience in establishing new businesses and catering to entrepreneurs and small and medium-sized enterprises (SMEs) in Qatar.

The programme is aimed at ambitious entrepreneurs living in Qatar, whether nationals or residents, who have an innovative idea that contributes to each incubator cycle's innovation theme.

The first cycle of the programme is focused on technology and will run in collaboration with Microsoft. Applications will run until September 30.

The top candidates will kick off their entrepreneurial journey with the programme starting on October 17.

Al-Baker said, "We are thrilled to announce the launch of the Curia Business Innovation Programme and are looking forward to empowering the next generation of business leaders.

The programme is part of Curia's ongoing efforts to provide entrepreneurs with the foundation necessary to launch their startup and accelerate their business to new heights."

In line with the Qatar National Vision 2030 to grow and diversify Qatar's economy, the programme serves as a gateway to boost innovation across numerous industries, including: agriculture and production; art and culture; education; entertainment and events; environmental sustainability; health and wellness; healthcare; sports; technology; and tourism.

The Curia Business Innovation Programme will run on a part-time basis for

12 weeks and is structured to help participants build the fundamental elements of their business plan, create a three to fiveyear financial forecast and, ultimately, develop an investor pitch deck.

By the end of the programme, the rising entrepreneurs will have launched their new startup and will be able to begin approaching potential investors and partners.

With support from Microsoft, the programme will engage participants in specialist-led workshops, provide them with one-on-one mentorship and grant them access to useful tech tools.

The workshops will cover numerous topics, including, but not limited to: Business purpose, industry and market research, organisational and legal structure, sales, marketing, operations, and financial plans.

Successful entrepreneurs who launch their startup will also have the opportunity to get fast tracked into the `Microsoft for Startups' programme.

2

Gulf Times Friday, August 27, 2021

BUSINESS

Xiaomi buys self-driving technology startup to propel its EV ambitions

Bloomberg Hong Kong

Xiaomi Corp will buy autonomous driving technology startup Deepmotion for about $77.4mn, sealing a deal to help further its ambitions of getting into the fastexpanding field.

The company announced the acquisition after reporting better-than-expected results for the second quarter, when a recovery in key markets like India helped it overtake Apple Inc to become the world's second-largest phone vendor by shipments. Revenue surged 64% to 87.79bn yuan ($13.6bn) in the quarter ended June, surpassing the 85.01bn yuan average of estimates.

Co-founder and chief executive officer Lei Jun is now spearheading a drive to take Xiaomi beyond smartphones. The 51-year-old is personally leading a project to make electric vehicles and the company has pledged an initial investment of $10bn over the next decade in the business. Lei has said the company has deep enough pockets to fund such a project, which requires years of heavy investment in development and manufacturing before the first car can even be sold.

Xiaomi's shares slid as much as 4.7%, their biggest intraday

Pedestrians walk past a Xiaomi Corp store in Hong Kong. Xiaomi will buy autonomous driving technology startup Deepmotion for about $77.4mn, sealing a deal to help further its ambitions of getting into the fast-expanding field.

fall in a month, after investors again punished Chinese tech stocks on Thursday. The stock was weighed down also by lingering concerns about Xiaomi's growing outlay on EVs.

"Xiaomi's results were very strong so the reaction appears to be just broader tech weakness," said Bloomberg Intelligence

analyst Matthew Kanterman. "Some concern remains about the degree of investment into Xiaomi's smart vehicle business, but these are longer-term initiatives and not impacting near-term results."

The acquisition of four-yearold Deepmotion, which develops driver assistance software,

is the latest in a series of moves Xiaomi's making to delve deeper into a crowded field.

A number of tech giants from Huawei Technologies Co to Baidu Inc have already spent years developing components and auto-driving technologies.

President Wang Xiang said on Wednesday the purchase is in-

tended to help Xiaomi develop Level 4 self-driving technology, which allows full autonomous driving.

"Through this acquisition, we hope to shorten the time to market for our product," Wang told reporters after releasing results. "We want to speed up our autonomous driving R&D." While other details about Xiaomi's car-making efforts remain unclear, it's kicked off a hiring spree of 500 engineers for the project and has talked to multiple automakers and local authorities for potential partnerships.

The company has also looked at investing in Black Sesame Technologies, a startup that develops artificial intelligence chips and systems for cars, Bloomberg News reported earlier this year.

On Wednesday, Xiaomi reported net income climbed more than 80% to 8.27bn yuan in the three months ended June. It seized the No 2 position globally for the first time during the quarter, in part after shipments in India almost doubled from a year earlier, according to reports from research firm IDC. Lei this month set his sights on reaching the top spot within three years, taking advantage of the waning fortunes of local rival Huawei, whose capacity has been hobbled by US sanctions.

QSE MARKET WATCH

Company Name

Zad Holding Co Widam Food Co Vodafone Qatar United Development Co Salam International Investme Qatar & Oman Investment Co Qatar Navigation Qatar National Cement Co Qatar National Bank Qlm Life & Medical Insurance Qatar Islamic Insurance Grou Qatar Industrial Manufactur Qatar International Islamic Qatari Investors Group Qatar Islamic Bank Qatar Gas Transport(Nakilat) Qatar General Insurance & Re Qatar German Co For Medical Qatar Fuel Qsc Qatar First Bank Qatar Electricity & Water Co Qatar Exchange Index Etf Qatar Cinema & Film Distrib Al Rayan Qatar Etf Qatar Insurance Co Qatar Aluminum Manufacturing

Ooredoo Qpsc Alijarah Holding Company Qps Mazaya Real Estate Developme Mesaieed Petrochemical Holdi

Al Meera Consumer Goods Co Medicare Group

Mannai Corporation Qsc Masraf Al Rayan

Al Khalij Commercial Bank Industries Qatar

Inma Holding Company Investment Holding Group Gulf Warehousing Company Gulf International Services Al Faleh Education Holding

Ezdan Holding Group Doha Insurance Co Doha Bank Qpsc Dlala Holding

Commercial Bank Psqc Barwa Real Estate Co Baladna

Al Khaleej Takaful Group Aamal Co

Al Ahli Bank

Lt Price % Chg

16.21 4.03 1.58 1.52 0.93 0.94 7.52 5.03 19.13 4.86 7.80 2.87 9.70 2.61 18.44 3.10 2.10 2.86 17.93 1.81 16.70 10.89 3.98 2.49 2.48 1.57 7.02 1.04 1.03 1.99 19.98 8.59 3.88 4.56 2.26 12.88 5.00 1.16 5.13 1.49 1.68 1.55 1.90 2.77 1.52 6.10 3.09 1.60 4.42 0.99 3.95

0.00 -0.81 -0.44 -0.66 -1.17 -1.27 -0.03 -0.02 -0.26 0.04 -1.89 -1.71 0.05 0.77 0.00 0.49 0.00 -1.18 -0.39 -0.22 -0.60 0.47 0.00 -0.40 0.57 -0.57 0.23 -1.98 -1.63 0.40 -0.10 0.32 -0.94 0.31 -0.04 -2.28 0.30 -0.85 0.02 0.07 1.52 -0.39 0.00 -0.43 0.00 0.91 0.00 -0.74 -0.07 -0.80 1.28

Volume

447,855 1,000,186 5,084,182 24,031,242 3,858,967 196,518 79,975 1,672,626 150 277,985 131,909 1,022,553 1,056,376 863,720 1,577,086 50,000 3,011,938 423,545 330,720 332,651 50,069 7,277 771,989 5,347,758 953,508 3,151,886 7,111,585 1,626,175 24,077 36,073 24,797 6,775,120 194,949 1,802,506 2,567,267 35,516,228 64,866 5,814,196 91,973 1,811,855 40,000 1,864,209 1,031,292 1,723,126 1,268,491 4,451,330 185,660 2,373,892 17,961

UBS hires team of Mideast private bankers from Credit Suisse

Bloomberg Zurich

UBS Group AG hired a team of private bankers for the United Arab Emirates from Credit Suisse Group AG, as the world's largest wealth manager expands in the Gulf region, people familiar with the matter said.

Georges El Khoury, a managing director and country head for the UAE, joins as deputy head for the country. He'll report to Ali Janoudi, who runs UBS's wealth business for the Middle East and Africa and Dubai private banking head Niels Zilkens, the people said, asking to remain anonymous as the hires are not public.

El Khoury will be joined by managing director Raoul Rahme, who becomes head of sales and advisory in Dubai. Iyad Tamim Jundi, Abdullatif Karami and Sarika Chandwani are also joining UBS, the people said.

"We confirm the departure of a small team based in the UAE," Dominique Gerster, a spokesman for Credit Suisse, said by email. "Credit Suisse remains fully committed to the Middle East re-

A sign hangs above the entrance to the UBS Group headquarters in Zurich. UBS hired a team of private bankers for the United Arab Emirates from Credit Suisse Group, as the world's largest wealth manager expands in the Gulf region.

gion and will continue to invest." Credit Suisse has seen a raft

of departures ? especially at its investment banking business ? after the twin Archegos Capital Management and Greensill scandals earlier this year dented its reputation and caused huge losses. New chairman Antonio Horta-Osorio is also conducting a review of the business, leading to further uncertainty for many bankers.

The bank's Middle East division has also seen significant exits in recent years, following complaints over a toxic culture promoted by regional head Bruno Daher. His management style, including fiery displays, personal attacks, and harangues peppered with expletives, alienated some of those working for him.

The bank said that Saad Osseiran will succeed El Khoury as country head for the UAE and

Oman, and Fahad al-Ebrahim will become market leader for Kuwait in addition to his current role as regional strategic client partner, according to Gerster.

Iqbal Khan, UBS's wealth unit co-head and president for the Europe, Middle East, and Africa region, last year set a target to double the client assets it manages in the Middle East and Africa.

The hires add to a string of additions in the Gulf by UBS amid steps to deepen its presence with some of the countries holding the biggest wealth concentrations in the world.

Earlier this year, it set up a second Middle Eastern hub in Qatar where it will eventually add investment banking and asset management services to its wealth business.

UBS has also hired Tarek Eido from HSBC Holdings Plc, to oversee the wealth business in Qatar and last year hired Dubaibased Desh Sharma, a heavyweight deal-maker for wealthy clients, from Credit Suisse along with four other bankers to join the unit dedicated to the Swiss bank's richest customers, Bloomberg has reported.

Deutsche Bank's DWS slumps after US, Germany probe ESG claims

Bloomberg Frankfurt

Deutsche Bank AG's asset-management arm DWS Group slumped the most in almost 18 months after authorities in the US and Germany began a probe into allegations that the firm exaggerated the environmental or social credentials of some ESG-labeled investment products.

BaFin, the firm's local financial markets regulator and US prosecutors are looking at recent claims made by DWS Group's ex-sustainability chief, Desiree Fixler, that the firm declared more assets had been screened for ESG criteria than they actually had, according to people familiar with the matter.

The news of the probes sent DWS's stock down as much as 14.4%, the biggest decline since March last year when the coronavirus pandemic hit financial markets. Deutsche Bank fell more than 2.9% before paring losses to trade 2.2% lower yesterday.

The probe adds to a slew of existing legal headaches for Deutsche Bank chief executive officer Christian Sewing as he seeks to take advantage of the fast-growing trend for investments that aim to further environmental or social goals. The lender has also been criticized by the US Federal Reserve for failings in its controls, while German supervisor BaFin has boosted its money-laundering monitor at the bank. There's an internal investigation into whether it mis-sold foreign-exchange derivatives.

A Bafin spokeswoman said by phone that it generally probes allegations given by whistleblowers, though declined to comment on individual companies. A DWS spokeswoman said that the firm "never comments on questions relating to regulatory matters." The investigation is also a setback for DWS CEO Asoka Woehrmann who has made sustainability

a key plank of his strategy for the asset manager. "We feel strongly about the change needed in the

global economy to ensure prosperity and sustainability for our future generations," he said in April. "It is our declared ambition to help lead this change."

The probe comes after Fixler told the Wall Street Journal earlier this month that the asset manager's actions on green products fell short of its words. Fixler started in DWS's newly created role of group sustainability officer in September 2020, and was dismissed earlier this year, just months later.

The Securities and Exchange Commission and federal prosecutors represented by the US attorney's office in Brooklyn are probing DWS after her claims, the Journal said when it first reported the news late Wednesday.

"If regulators are investigating DWS's ESG credentials claims, this could be an issue that has implications across the sector as it sets a precedent for regulators' sustainability reporting expectations," said Mandeep Jagpal, an analyst at RBC Europe Ltd.

Fears that investment managers will be tempted to over-state the environmental and social benefits of their products are causing regulators to pay greater attention to their claims. In March, the SEC formed a task force aimed at investigating financial institutions' sustainability claims, to "pro-actively identify ESGrelated misconduct."

Europe's asset management industry already had to remove the ESG label from an estimated $2tn in assets between 2018 and 2020, as tougher regulations were gradually put in place. Europe's Sustainable Finance Disclosure Regulation, which took effect in March, requires asset managers to document claims of sustainability in their portfolios, as policy makers in the region set the world's most ambitious agenda to drive capital away from carbon emitters.

TD beats estimates as economic rebound boosts Canada loans

Bloomberg Toronto

Toronto-Dominion Bank's focus on consumer banking paid off last quarter, with a reopening of the economy in Canada boosting lending results.

Net income in the Toronto-based bank's Canadian retail segment rose 68% to C$2.13bn ($1.69bn), helped by a 7.7% gain in person loans, according to a statement on Thursday. Overall profit for the fiscal third quarter topped analysts' estimates. Canadian Imperial Bank of Commerce saw similar trends in its results for the three months through July, which also exceeded projections.

The Canadian economy's comeback in recent months, even as Covid-19 lingers, fuelled strong domestic lending results at the country's banks during the third quarter, with personal loans gaining momentum and highly profitable credit cards starting to

see an uptick after a year of declines. That's building on the solid foundation of mortgage growth, spurred by Canada's hot housing market, that has helped the nation's banks weather the pandemic.

"It's been good to see the reopening take hold, and as vaccination rates improve, customers and Canadians are beginning to resume their normal lives and habits," Toronto-Dominion chief financial officer Riaz Ahmed said in an interview. "We're seeing as a result record sales on credit cards and balances starting to edge upward."

Toronto-Dominion's sizeable US operations, meanwhile, saw loan balances decline as continued government stimulus programmes, including the Paycheck Protection Programme, reduced clients' need to take on new borrowings. Personal loan balances in the US retail segment slid 0.7% from the previous quarter and 1.5% from a year earlier.

"The US relief programs for Americans have been quite attractive, including a very significant PPP loan-

forgiveness programme," Ahmed said. "That has resulted in a tremendous amount of liquidity built up in the US, which we see in our balance sheet as

growth in deposits and cash, and, as a result, we see that loan growth has yet to materialise."

Toronto-Dominion's net income

rose 58% to C$3.55bn, or C$1.92 a share. Profit excluding some items was C$1.96 a share. Analysts estimated C$1.92, on average.

CIBC's results followed a similar trajectory, with profit in its Canadian personal and business banking division rising 40% to C$642mn, helped by gains in mortgages and personal loans.

In contrast to Toronto-Dominion's US retail presence, CIBC's exposure to the US is focused on commercial lending and wealth management. While profit in that unit rose more than fivefold from a year earlier, loan balances for both businesses and wealth clients were down from both a year earlier and from the second quarter. Companywide, profit excluding some items was C$3.93 a share, topping analysts' forecast of C$3.41.

The lender has been working to bulk up its capital-markets business and presence in the US, announcing in June the purchase of a minority stake in Chicago-based Loop Capital. CIBC's capital-markets division boosted net

income 11% to C$491mn last quarter. The Toronto-based bank also an-

nounced a plan to achieve net-zero greenhouse-gas emissions from its operations and financing activities by 2050, and set a goal of reaching C$300bn in sustainable financing by 2030.

The spread of Covid-19's highly contagious delta variant has prompted concerns about the durability of the recovery in both the US and Canada. Delta contributed to Toronto-Dominion's decision to reduce its recovery of set-asides for potential loan losses in the three months through July to C$37mn, down from a C$377mn release in the previous quarter, Ahmed said. CIBC recovered C$99mn in provisions for credit losses in the third quarter, compared with set-asides of C$32mn in the second quarter.

Toronto-Dominion's shares have risen 19% this year and CIBC's have advanced 39%, compared with a 26% gain for the S&P/TSX Commercial Banks Index.

Gulf Times Friday, August 27, 2021

3

BUSINESS

Sculptures seen outside the Hong Kong Stock Exchange. The Hang Seng Index closed down 1.7% to 25,265.56 points yesterday.

Asia markets struggle as traders turn focus to Powell's speech

AFP Hong Kong

Asian markets mostly fell on Thursday as hopes for the global recovery and signs of a possible slowdown in new virus infections play off against the prospect of an end to Federal Reserve largesse and China's regulatory clampdown.

Equities and oil have by and large enjoyed a positive week, helped by US full approval of Pfizer-BioNTech's vaccine and speculation the Fed will take its time in removing its ultra-loose monetary policy whenever it begins to do so.

However, while Wall Street continued to chalk up new records, Asian investors shifted a little more cautiously as they assessed the outlook.

Top of the agenda this week is Fed boss Jerome Powell's speech on Friday to the Jackson Hole symposium of central bankers and economists, which will be closely followed for any indication about

its policy plans in light of rising inflation and the economic rebound.

The bank is widely expected to begin easing back on its vast bond-buying programme by the end of the year, though the spread of the Delta variant and its impact on growth has some observers and even hawkish Fed members rethinking the wisdom of doing so.

Analysts said the speed and timing of a pullback could be crucial.

"When the Fed actually announces the taper, it will likely also give some degree of information on what pace it will take and how flexible or inflexible they want to be with the process," Guneet Dhingra, at Morgan Stanley, said.

"That could provide a key signal for the rate-hike cycle -- particularly with regard to the pace of the hikes."

However, some warn that starting to taper too late could cause problems.

"It would be dangerous for the Fed to do this because it needs to be in a position -- from the middle of next year -- to start putting out the rhetoric that they

may be raising rates," said Steven Barrow, of Standard Bank Group.

"And we know it's not out of the realm of possibilities that the Fed could lift rates some time around the end of next year. So I'm focused more on the end point for Fed tapering than the starting point."

Asian investors struggled to maintain Wall Street's rally.

Hong Kong led losses as tech firms were dragged down by weak earnings results that came as China embarked on its crackdown on the industry, while Shanghai, Tokyo, Sydney, Singapore, Wellington, Manila and Jakarta also fell.

However, Tokyo, Taipei, Mumbai and Bangkok eked out gains.

Seoul was also in the red after South Korea became one of the first major economies to start lifting interest rates since they were cut to record lows last year to battle the coronavirus impact.

The central bank move came as it looks to tackle surging household debt and sharp rises in property prices.

The won jumped against the dollar after the announcement. London, Paris and Frankfurt all fell soon after opening.

Traders are also keeping a keen eye on China after it rattled world markets in recent weeks with a wave of regulations aimed at winding in private firms -- particularly in the tech sector -- it considered to have become too powerful and posed security risks.

While there has been little noise out of Beijing lately, the state-backed People's Daily reported that Xi Jinping had said China should try to achieve key economic and social development objectives this year.

While it did not set out specifics, the president has embarked on a mission to rein in the country's tycoons and powerful organisations, instead focusing on "common prosperity".

In Tokyo, the Nikkei 225 closed up 0.1% to 27,742.29 points; Hong Kong -- Hang Seng Index ended down 1.7% to 25,265.56 points and Shanghai Composite closed down 1.1% to 3,501.66 points yesterday.

Emerging stocks and currencies subdued over virus worries

Reuters Singapore

Emerging market currencies were muted on Thursday against a steadying dollar, as the focus remained on an annual central banks' symposium, while stocks tracked Asian units lower on rising cases of Delta coronavirus variant. The MSCI's index for emerging market currencies struggled for direction, with the dollar gaining some ground. Investors eye the Federal Reserve's Jackson Hole symposium for clues about the timeline for tapering monetary stimulus. "Expectations of any significant policy announcement at the -- virtual -- Jackson Hole event are low," said Bas van Geffen, senior macro strategist at Rabobank. "In fact, the market appears have added some speculation that the taper announcement could be delayed even further." South Africa's rand weakened 0.2%, lagging its peers in Europe, Middle East and Africa. Government bonds in Africa's most industrialised economy also fell in early trading. The Russian rouble and the Turkish lira eked out gains.

Russia's central bank is set to publish a report on expectations on inflation -- which were elevated recently -- providing the bank with grounds to raise rates. Markets in Asia were on the back foot, as fears about the fast-spreading coronavirus variant dulled sentiment, with the MSCI's broadest index of Asia-Pacific shares outside Japan snapping a three-day winning streak. Shares in Russia were subdued as investors awaited earnings reports. Russian oil & gas company Tatneft fell 3.5% and was on track for its worst day in over a month, after the first-half dividend came in below expectations. Russian lender TCS Group Holding fell 1% even as it reported another record quarterly net profit and raised its full-year profit guidance. South Africa also had a slew of earnings reports, while the country's stock index fell 0.4%. Absa Bank Kenya rose 0.3% after its first-half pretax profit quadrupled year on year after loan impairments dropped and interest income jumped. Most currencies in central and eastern Europe were trading in a narrow range.

Friday, August 27, 2021

GULF TIMES

BUSINESS

QSE correction enters second day but index stays above 11,100

By Santhosh V Perumal Business Reporter

The local and foreign retail investors yesterday turned bullish in the Qatar Stock Exchange, which otherwise entered the second day of bearish run. The buying interests in transport and insurance notwithstanding, the 20-stock Qatar Index settled 32 points or 0.29% lower at 11,102.66 points, having touched an intraday high of 11,153 points. The foreign institutions continued to be net buyers but with lesser intensity in the market, whose year-to-date gains were at 6.39%. Domestic funds were seen increasingly into net profit booking in the bourse, whose capitalisation shed more than

QR2bn or 0.34% to QR638.98bn, mainly on small and microcap segments. About 59% of the traded constituents were in the red in the market, which saw the industrials and consumer goods and services sectors together constitute about 66% of the total trading volume. The overall trade turnover and volume were on the decline in the bourse, where the Gulf institutions turned net sellers. The Islamic index was seen declining faster than the other indices in the market, which saw a total of 57,346 exchange traded funds (Masraf Al Rayan sponsored QATR and Doha Bank sponsored QETF) valued at QR559,489 change hands across 15 deals. The Total Return Index shrank 0.29% to 21,978.39 points, All Share Index

by 0.29% to 3,525.07 points and Al Rayan Islamic Index (Price) by 0.36% to 2,509.77 points in the market which saw no trading of sovereign bonds and treasury bills. The industrials sector index declined 1.32%, real estate (0.39%) and consumer goods and services (0.34%); while transport gained 0.25%, insurance (0.18%) and telecom (0.03%). The index of banks and financial services rather treaded a flat path. Major losers included Industries Qatar, Alijarah Holding, Qatar Islamic Insurance, Qatar Industrial Manufacturing, Mazaya Qatar, QNB, Qatar Oman Investment, Qatari German Company for Medical Devices and Salam International Investment. Nevertheless, Ahlibank Qatar, Commercial Bank, Qatari Investors

Group, Qatar Insurance, Nakilat and Ooredoo were among the gainers. The domestic funds' net selling increased considerably to QR31.78mn against QR12.48mn on August 25. The Gulf funds turned net sellers to the tune of QR1.54mn compared with net buyers of QR1.64mn on Wednesday. The foreign institutions' net buying weakened markedly to QR9.67mn against QR13.43mn the previous day. The Arab individuals' net buying also fell perceptibly to QR4.81mn compared to QR7.09mn on August 25. However, local retail investors were net buyers to the extent of QR16.31mn against net sellers of QR8.42mn on Wednesday. Foreign individuals turned net buyers to the tune of QR1.99mn compared with net sellers of QR1.23mn the previous

day. The Gulf individuals were net buyers to the extent of QR0.54mn against net profit takers of QR0.04mn on August 25. The Arab institutions had no major net exposure for the fifth consecutive session. Total trade volume fell 22% to 132mn shares, value by 22% to Q312.7mn and transactions by 12% to 8,630. The market witnessed 41% plunge in insurance sector's trade volume to 1.33mn equities, 27% in value to QR5.08mn and 27% in deals to 121. The telecom sector's trade volume plummeted 39% to 1.95mn stocks, value by 39% to QR8.26mn and transactions by 38% to 427. There was 37% shrinkage in the consumer goods and services sector's trade volume to 32.45mn shares, 45%

in value to QR48.42mn and 35% in deals to 1,133. The real estate sector's trade volume tanked 31% to 15.28mn equities, value by 36% to QR21.8mn and transactions by 31% to 1,167. The industrials sector reported 13% contraction in trade volume to 54.08mn stocks and 11% in value to QR95.84mn but on 4% jump in deals to 2,296. The transport sector's trade volume shrank 7% to 1.84mn shares and value by 8% to QR6.66mn, whereas transactions grew 45% to 413. The banks and financial services sector saw 5% dip in trade volume to 25.07mn equities and 13% in value to QR126.63mn but on 3% expansion in deals to 3,073. In the venture market, both Al Faleh and Mekdam Holding were seen gaining 1.52% and 0.68% respectively.

Fed Bank St Louis president James Bullard (left) and Esther George, president and chief executive officer of the Federal Reserve Bank of Kansas City.

Fed officials call for early taper despite Delta risk

Bloomberg New York

Two of the Federal Reserve's leading hawks, on the eve of the central bank's annual Jackson Hole symposium, urged that policy makers move quickly to slow asset purchases despite the risk from the spreading Delta variant.

"I don't think it changes my own calculus that it is time to begin to make those adjustments given the gains we have seen so far," Federal Reserve Bank of Kansas City President Esther George said in a Bloomberg TV interview with Michael McKee conducted on Wednesday evening, prior to the bank's annual symposium on Friday, which will be held virtually for a second year because of the Covid-19 pandemic.

"I think it's important to get started and the conditions of pace, timing of when we end, I'm open minded to listening to the debates around that," George said. "But I am less interested in deferring that decision."

Fed Bank St Louis President James Bullard echoed that view in a CNBC in-

terview Thursday, adding that the Delta's impact could be reaching a peak.

"Some on Wall Street seem to think that the numbers are rolling over on Delta," Bullard said. "I don't really know if we can say that yet but it will peak at some point. The main message here is the economy has learned to adapt to the pandemic."

US stock futures declined as investors absorbed their comments. Treasury yields rose along with the dollar.

While George has been a longtime policy hawk and Bullard has changed his views to more hawkish this year in light of a stronger job market, both will gain votes in 2022 on the policy-setting Federal Open Market Committee. Fed Chair Jerome Powell has struck a more patient tone and will give his take on the policy outlook Friday in a virtual speech at the conference.

George suggested she might have some flexibility on when the taper should actually be implemented, saying "I think we should get started this year so that we can begin to pare the amount of accommodation."

Fed officials have highlighted increased risks from the Delta variant,

which could affect the pace of economic recovery from the pandemic and alter the central bank's willingness to slow its monetary stimulus. Another policy hawk, Dallas Fed President Robert Kaplan, has said he would be open to adjusting calls for a quick tapering of bond buying if Delta hurts the economy's progress.

"The economy continues to grow at a strong rate," George said, adding that in terms of the potential risk of the Delta variant, "you can imagine that it might slow down some of the returns to the labour market. But I don't expect at this point that it will derail the economy as we saw last year when we first had to deal with the virus."

Most Federal Reserve officials agreed last month they could start slowing the pace of bond purchases later this year, judging that enough progress had been made toward their inflation goal, while gains had been made toward their employment objective, according to the minutes of the FOMC's July 27-28 meeting.

Bullard said he favoured getting started with tapering in the fall and wrapping up the process by the end of the first

quarter, which would give the FOMC the option of raising rates earlier in 2022 if needed.

`'There is some worry that we are doing more damage than helping with the asset purchases because there is an incipient housing bubble in the US," Bullard said.

With the median house price approaching $400,000, Bullard added, "You are pricing low-income people out of this market. I'm not sure that is what we want to do. We got into a lot of trouble in the mid-2000s by being too complacent about housing prices."

The Fed has pledged to buy $80bn in Treasuries and $40bn in mortgage securities a month until the economy shows "substantial further progress" on inflation and employment as it recovers from Covid-19.

The Kansas City Fed shifted its annual gathering last Friday in light of elevated health risks outside Jackson, Wyoming. Covid-19 cases have spiked across the country as the Delta variant spreads, spurring companies to re-evaluate return-to-work plans and schools to return to virtual education, quarantines and mask requirements.

US second-quarter economic growth raised; corporate profits surge

Reuters Washington

The US economy grew a bit faster than initially thought in the second quarter, lifting the level of gross domestic product above its prepandemic peak, as massive fiscal stimulus and the impact of Covid-19 vaccinations boosted spending.

The report from the Commerce Department on Thursday also showed a hefty increase in corporate profits, which should allow businesses to continue buying equipment and hiring workers, and keep the economy on a solid growth path in the third quarter even as soaring coronavirus cases cool consumer spending.

Gross domestic product increased at a 6.6% annualised rate, the government said in its second estimate of GDP growth for the April-June period. That was revised up from the 6.5% pace of expansion reported in July.

Economists polled by Reuters had expected that second-quarter GDP growth would be raised to a 6.7% pace.

The economy grew at a 6.3% rate in the first quarter, and has recouped the steep losses suffered during the two-month Covid-19 recession. The level of GDP is now 0.8% higher than it was at its peak in the fourth quarter of 2019.

The upward revisions to last quarter's GDP growth reflected a slightly more robust pace of consumer spending than initially estimated.

The government disbursed one-time stimulus checks to some middle- and low-income households during the quarter.

The Federal Reserve has maintained its ultra easy monetary policy stance, keeping interest rates at historically low levels and boosting stock market prices.

Consumer spending, which accounts for more than twothirds of the US economy, also got a lift from vaccinations, which fuelled demand for services like air travel, hotel accom-

modation, dining out as well as entertainment.

Growth in consumer spending was raised to an 11.9% rate from the previously reported 11.8% pace. But momentum appears to have slowed early in the third quarter amid a resurgence of Covid-19 infections driven by the Delta variant of the coronavirus.

Persistent bottlenecks in the supply chain are also causing shortages of goods like motor vehicles and some household appliances, hurting retail sales.

Credit card data suggests spending on services like airfares, cruises as well as hotels and motels has been slowing.

"This is a speed bump due to the interaction of Delta and supply-side constraints," said Michelle Meyer, chief US economist at Bank of America Securities in New York. "We still believe the foundation for the economy is solid and all signs point to strong underlying demand."

The dollar rose against a basket of currencies. US Treasury prices were mostly lower.

The moderation in consumer spending is likely to be offset by strong business investment in equipment, which logged a fourth straight quarter of double-digit growth.

National after-tax profits without inventory valuation and capital consumption adjustments, conceptually most similar to S&P 500 profits, increased at a $303.6bn rate, or 12.8% pace, in the second quarter, up from the 9.4% pace notched in the January-March period.

Profits were up 69.3% from a year ago. When measured from the income side, the US economy grew at a 1.6% rate in the second quarter after expanding at a 6.3% pace in the first quarter.

The moderate rise in gross domestic income reflected an increase in subsidies, which are a subtraction in the calculation of GDI. The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 4.0% pace after rising at a 6.3% rate in the first three months of the year.

Virtual Jackson Hole underscores uncertainty in Fed's next steps

Bloomberg New York

Having already dashed plans for Federal Reserve officials to meet in person in Jackson Hole this week, rising coronavirus cases are now limiting what Jerome Powell can say about what comes next for US monetary policy.

The Fed chair will speak today and is expected to reinforce the message that it will probably be appropriate to begin scaling back the Fed's $120bna-month bond-buying programme by the end of the year.

But the abrupt change of conference plans ? the Wyoming gathering's host shifted the format on August 20 ? underscores the uncertainty officials face as they debate when to begin winding down the stimulus measures they rolled out last year at the outset of the pandemic.

"You don't want to rush through tapering or rush into rate hikes when Delta is still a threat, and there's potential signs of some slowing in certain indicators at the moment," said Brett Ryan, a senior

US economist at Deutsche Bank Securities in New York.

2021 Taper: Minutes of their recent policy meeting in late July, published on August 18, showed most Fed officials expected it would be appropriate to begin tapering the bond-buying programme before the end of the year. Beyond that, opinions about the timing of interest-rate increases start to splinter.

The uncertainty and disagreement form the backdrop of Powell's speech at this year's conference, the theme of which is appropriately titled "Macroeconomic Policy in an Uneven Economy." He will probably seek to emphasise that even if tapering does commence in the coming months, that doesn't automatically put the central bank on a glide path to rate hikes in 2022.

"Powell has a committee with many different views, and what he is going to want to do is bring people together around a process whereby they retain flexibility to react in either direction, should they prove wrong on one of their forecasts," Ryan said.

A few weeks ago, at the time of the July 27-28 Federal Open Market Committee meeting, the US economy looked like it was roaring ahead. The

Labor Department's monthly jobs report, published a week later on August 6, confirmed that view. It showed two months in a row of hiring around 940,000 in June and July, a pace that would quickly whittle away at the remaining shortfall of around 6mn jobs relative to pre-pandemic employ-

ment levels if it were to continue. Now, there's a bigger question mark hanging over the labour-market recovery, which is crucial to the Fed's plans.

Last year, during the Jackson Hole symposium, Powell unveiled a new framework for rate-setting that the FOMC would use going forward, itself

the outcome of a nearly 20-month internal review.

"Bloomberg Economics expects the FOMC to tease the taper in its September statement; formally announce it in November; and begin reducing the pace of purchases in December. Net purchases should come to an end during the second half of 2022 ? well before the Fed lifts its policy interest rate off the floor," says By David Wilcox, economist at Bloomberg.

The new strategy dictates Fed officials allow the economic expansion to progress further than they have in the past before raising interest rates, to drive unemployment rates down faster and allow low-income groups to share in the benefits from a strong economy.

That also means allowing inflation to overshoot the central bank's 2% target for a time, to make up for periods coming out of downturns when it underruns the target. Powell will probably highlight both aspects of the new framework in his speech, which will mark the conclusion of its first year in action.

While job growth has picked up swiftly as vaccines have rolled out across the country and consumers have resumed high-contact activities, prompting

mass rehiring in leisure and hospitality, the spread of the Delta variant has put a damper on progress, according to Michelle Meyer, head of US economics at Bank of America in New York.

Meyer watches aggregated BofA data on its customers' debit-card and credit-card spending, which is deteriorating.

"In the last six weeks, there's been a clear moderation in consumer spending," she said. "Particularly leisure services spending ? so, airfare spending, lodging, cruises and entertainment ? and to some extent restaurants and bars, albeit less so. And the timing of that corresponded with the rise in Delta cases."

Coming meetings: The question is what kind of impact that might have on the next few jobs reports, which Fed officials will be consulting at upcoming FOMC meetings as they debate when to begin tapering the bond purchases.

Another factor to consider is whether the Delta variant will upend the return to school in the fall semester, which could also slow hiring by preventing parents without childcare options from returning to work, Meyer said.

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